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Chch rebuild may boost manufacturing

Wednesday 28 Nov 2012 2:27 p.m.

New Zealand's manufacturing output is about nine percent lower than before the global financial crisis (file)

By Paul McBeth

The $30 billion rebuild of New Zealand's second-biggest city should help revive a lagging domestic manufacturing sector, which is typically linked to the construction industry, according to Reserve Bank governor Graeme Wheeler.

New Zealand's manufacturing output is about nine percent lower than before the global financial crisis, much of which has come from tepid investment in construction which has sapped the domestic side of the sector, Mr Wheeler told parliament's finance and expenditure committee today.

That should get a kickstart as the Canterbury rebuild gets under way.

"The reconstruction of Canterbury, the investment likely to take place is more than $30 billion and spread out over several years of course. But one would expect that would be a very positive effect for manufacturing," he said.

"The main output effects for the manufacturing sector have been on the domestic sector - a lot of it has been linked to the significant decline in investment taking place, particularly residential investment in recent years."

New Zealand's manufacturing activity expanded last month, having spent the five previous months shrinking, according to the BNZ-Business New Zealand performance of manufacturing index.

The sector has been hit a number of high-profile job losses, the latest being Carter Holt Harvey's decision to lay off 70 staff at its Rotorua and Tokoroa plants.

New Zealand's strong currency, which recently traded at 82.02 US cents, has been cited by manufacturers as the major reason for job losses.

Mr Wheeler said manufacturers have been affected by the strong currency in the past three years, but "you've still seen exports grow in volume terms of the order of about three percent per annum."